Build It (in the Meatpacking) And They Will Come

December 4, 2012

Wall Street Journal
December 3, 2012
By Eliot Brown

The meatpacking district has gotten so hot that a development group is moving ahead with a $100 million project there before signing any tenants.

The developers, Taconic Investment Partners and Thor Equities LLC, have obtained a $60 million loan from an M&T Bank MTB -0.23% Corp.-led group for the 55,000-square-foot office and retail project at 837 Washington St. (they were advised by Holliday Fenoglio Fowler LP in their deal with the bank). The partners also are putting in about $40 million of equity into the project, a twisting metal and glass building that will sit across the street from the Standard Hotel and High Line.

Excavation is already under way, and the group expects to begin putting up steel early next year.

It’s unusual these days for developers to proceed with so-called speculative projects—those that get under way without a significant amount of preleasing. Given the uncertain economy, banks are skittish about such risky deals.

But M&T believes demand will stay strong in the neighborhood, where there’s little vacant office space and a rising appeal from developments like the new Whitney Museum, says Peter D’Arcy, a group vice president at M&T.

The developers are aiming for ambitious rents. Joe Sitt, Thor’s chief executive, said he expects to get $600 per square foot for the retail and nearly $100 per square foot for the office space, a number more often seen at the tops of Midtown skyscrapers. “We’ll get it,” he says. “I believe in the neighborhood—I’m putting my money where my mouth is.”